Academy Sports and Outdoors Earnings Call Insights

Academy Sports And Outdoors, Inc. ((ASO)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Academy Sports and Outdoors, Inc. presented a mixed bag of insights, reflecting both positive strides and ongoing challenges. The company highlighted strong performances in new store openings, omnichannel growth, and a shift towards attracting higher-income customers. However, these positives were tempered by negative comp sales and difficulties in capturing the low-income consumer segment. While strategic initiatives appear promising, certain headwinds remain a concern.

New Store Openings and Comps

Academy Sports and Outdoors reported promising results from its new store openings, with 26 new stores from the 2022-2024 vintages showing high single-digit comps in Q3. Looking ahead, the company plans to open an additional 24 stores next year, indicating a robust expansion strategy.

Omnichannel Growth

The company experienced significant acceleration in its omnichannel growth, which jumped from 10% in Q1 to 18% in Q2, and further to 22% in Q3. This growth underscores the company’s successful integration of online and offline sales channels.

Gross Margin Improvement

Academy Sports and Outdoors achieved a notable increase in its gross margin rate, which rose to 35.7%, marking an improvement of 170 basis points from the previous year. This improvement highlights the company’s effective cost management and pricing strategies.

Consumer Demographic Shift

The company has seen a shift in its consumer demographics, with high-income consumers, those earning over $100,000, now accounting for 40% of sales. Traffic from these cohorts has grown in the high single digits, reflecting a successful targeting strategy.

Strong Black Friday Performance

Academy Sports and Outdoors celebrated its largest Black Friday weekend ever, surpassing the previous year’s record. This achievement underscores the company’s strong promotional strategies and consumer engagement.

Jordan and Nike Brand Success

The combined growth of the Jordan and Nike brands contributed to high single-digit growth, attracting new higher-income customers. This success highlights the company’s strategic partnerships with popular brands.

Negative Comp Sales

Despite various successes, the company reported negative comp sales, with sales totaling $1.38 billion and a negative 0.9% comp. This indicates some underlying challenges in maintaining sales momentum.

Ammo Sales Decline

Ammo sales posed a significant challenge, acting as a 130 basis points headwind to comp sales due to the previous year’s election run-up. This decline reflects the volatility in certain product categories.

Low-Income Consumer Pullback

The company faced traffic erosion in lower-income cohorts, with declines in the mid-single digits among consumers earning less than $50,000 a year. This trend highlights the challenges in appealing to budget-conscious consumers.

SG&A Increase

There was an increase in SG&A expenses by approximately $28 million or 120 basis points, driven by new store growth and technology investments. This rise indicates the company’s commitment to expanding its infrastructure and technological capabilities.

Forward-Looking Guidance

Looking forward, Academy Sports and Outdoors provided updated guidance for fiscal year 2025, narrowing the comp sales guidance range to between negative 2% and flat. The company also adjusted its gross margin guidance to between 34.3% and 34.5%. With plans to open 20 to 25 additional stores in 2026, focusing 80% in legacy markets and 20% in new markets, the company is positioning itself for continued growth.

In conclusion, the earnings call for Academy Sports and Outdoors, Inc. painted a picture of a company making strategic advances while navigating certain challenges. The positive sentiment from new store openings, omnichannel growth, and brand partnerships was somewhat offset by negative comp sales and difficulties in the low-income segment. Nevertheless, the forward-looking guidance suggests a cautious optimism for the future.